How Advertising-Based Video on Demand Maximizes OTT Content Monetization

With more than 100 million people using OTT subscription services worldwide, this is an industry that’s ripe with opportunities for growth. It’s why 81% of industry leaders from major U.S. media companies say they want to increase their OTT content.

However, as publishers rush to enter the OTT space, they need to be careful about how they monetize their content. Choose the wrong pricing model and your OTT play could fail before the bulk of your customers even get to try it. That’s why it’s so important to have a strong understanding of your company’s OTT monetization options before launching a service.

Breaking Down Your Options for OTT Monetization

SVOD - Subscription Video on Demand

SVOD services are incredibly popular. According to Business Insider, 55% of Americans use Netflix and 31% use Amazon Prime Video. It’s estimated that more than half a billion people will use services like these by 2022.

The business model for SVOD is simple. Customers pay a set fee, usually monthly, to access as much of a publisher’s content as they want. However, the average household in the United States subscribes to 2.8 SVOD services. After accounting for major players like Netflix, Amazon, and Hulu, that leaves very little room for new SVOD services to flourish.

TVOD - Transactional Video on Demand

TVOD services charge customers on a pay-per-view basis. Typically, a customer will log on to the service, find a piece of content they want to watch, and pay a small fee to access it. Successful examples of TVOD services include Amazon’s video store, Apple’s iTunes, and Sky Box Office.

Experts expect the demand for TVOD services to continue growing throughout the 2020s. By 2025, it’s estimated there will be around 571 million TVOD users. This demand makes starting a TVOD OTT service appealing. However, since customers only pay publishers for one piece of content at a time, this could limit your company’s ability to earn a return on its investments.

AVOD - Advertising-Based Video on Demand

AVOD stands out from other OTT monetization paths in that it provides consumers with free access to content. Instead of profiting from pay-per-view purchases or subscriptions, AVOD services earn publishers money through advertisements. They operate similarly to broadcast television in that consumers need to sit through ads in order to watch the content they want to see.

Some major companies, such as YouTube, are beginning to embrace AVOD for their premium content instead of subscription models. There are several reasons for this. Understanding them could help your publishing company maximize its OTT content monetization strategy.

Experts expect the demand for TVOD services to continue growing throughout the 2020s. By 2025, it’s estimated there will be around 571 million TVOD users. This demand makes starting a TVOD OTT service appealing. However, since customers only pay publishers for one piece of content at a time, this could limit your company’s ability to earn a return on its investments.

Why AVOD is the Best Model for Publishers to Reach ROI

The theory behind AVOD is twofold. First, by allowing consumers to access your content for free, your publishing company can rapidly expand the audience for its OTT service.

Tubi, a popular AVOD service, was founded in 2014. By June 2019 it had more than 20 million monthly active users in North America alone. The company’s app was also downloaded more than 3 million times in the last three months of that year. It’s much more difficult for a new OTT company to earn explosive growth like this when operating under a paid model.

As your audience grows, so too will your company’s ad revenue. Even better, you’ll earn on every view for every piece of your content. This differs from subscription models, which allow consumers to watch as much content as they want for a single price.

AVOD services also allow your company to profit multiple times from a single view of a single piece of content. For example, you could show an ad at the beginning of a show, in the middle of it, and towards the end. This differs from TVOD services, which only allow companies to profit once from each content view.

To put this into perspective, OTT ad spending is expected to reach nearly $11 billion annually by 2021. Advertisers are flocking to this space because it gives them the opportunity to engage with consumers in more targeted ways than traditional broadcast television. Creating an AVOD service position your company to benefit from this.

Optimizing User Experience with AVOD

Some publishers worry that running ads will disrupt their users’ viewing experience. However, modern AVOD technology is making it easier and easier to avoid this issue. Today, OTT publishers have full control of both their ad framework and frequency.

For example, you might run a pod of ads one time instead of making the viewer sit through multiple ad breaks. AVOD advertisements also have high CPMs, which means that a publisher won’t have to include as many to reach ROI as they would have to on other apps or platforms.

Finally, many companies are starting to offer advanced ads for OTT. Examples of this include six-second ads that run alongside the content and computerized product insertion that the viewer may hardly notice. Advanced ads like these give your company the ability to profit off of OTT content in a way that will significantly improve your users’ viewing experience.

With so many tools at your disposal, there’s no reason that your AVOD service needs to compromise the viewing experience. Instead, AVOD enables publishers to reach ROI in ways that consumers will appreciate.

Embrace AVOD with the Help of VTV Studio

If your publishing company is ready to create an AVOD service, you shouldn’t do so on your own. Enlisting the help of an expert can help you avoid common pitfalls, create a stronger offering, and find paths to stable monetization and ROI.

Getting started is as easy as reaching out to VTV Studio. We’re the AVOD experts who know what it takes to find success in this industry. Our team is standing by to answer your questions and make specific recommendations for your new AVOD service.

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